SOURCE: Nova Lifestyle, Inc.

Nova Lifestyle, Inc.

November 14, 2012 16:05 ET

Nova LifeStyle Sales Grew 72% in 2012 Third Quarter; Consumer Embrace of Urban Contemporary Home Furnishings Led Strong Gains in the U.S. and Worldwide

Company Maintains Full Year Growth Forecast; Sees Further Advances in 2013

COMMERCE, CA--(Marketwire - Nov 14, 2012) -  Nova LifeStyle, Inc. (OTCQB: STVS) (OTCBB: STVS) (website: www.novalifestyle.com), a rapidly growing U.S. based designer, manufacturer and global distributor of urban contemporary furniture, today announced another quarter of record sales in its third quarter ended September 30, 2012. Sales grew 72% to $19.20 million, up from $11.19 million in the same period last year. Growth was fueled by strong demand for the Company's products around the world, with triple digit gains achieved in the U.S., and double digit gains in Europe and China. Net income in the 2012 third quarter declined slightly to $1.24 million, from $1.68 million in the year earlier quarter, primarily because keeping pace with strong global demand required utilization of higher cost third party manufacturers. 

On a per share basis, earnings in the third quarter of 2012 were $0.07 on 18,709,596 diluted shares compared with $0.10 per share in 2011 on 16,641,815 diluted shares.

Sales Up 76% Through First Nine Months of 2012
The year over year sales gain for the nine month period ended September 30, 2012 was 76%. Sales reached a record $46.35 million, up from $26.08 million in the same period in 2011, reflecting year to date quarter by quarter sequential sales gains. Net income in the first nine months of 2012 grew 12% to $3.65 million, or $0.20 per share on 18,652,892 diluted shares from $3.27 million, or $0.24 per share, on 13,522,150 diluted shares in the 2011 period.

The Company noted that the increase in diluted shares outstanding in the three month and nine month periods in 2012 was primarily a consequence of two successful private placements in late 2011 and early 2012 which netted the Company a combined $5.61 million to finance growth.

Gains Achieved Globally

Sales in North America of the Company's Diamond Sofa brand urban contemporary furniture grew 110% year over year in the 2012 third quarter, reaching $7.82 million, as it continued to add new "top 100" furniture retailers and distributors to its customer base. Despite a decision to temporarily maintain marketing efforts in Europe rather than increase them, European sales in the quarter were up 85% to $4.87 million. Overall sales in China during the 2012 third quarter increased 83% to $5.07 million including wholesalers, agents and branded sales to the Company's 100+ domestic franchise stores. Sales to other Asian countries also continued to grow in the quarter reaching $1.26 million.

Gross Margin Target Remains 30%

While gross profit grew 20% to $3.83 million in the 2012 third quarter, gross profit margin declined to 20% from a year earlier 29% for the reasons noted above. Additionally, the Company cited costs for raw material and labor in China, and costs in connection with building a new factory in Dongguan. Nevertheless, it believes that gross profit margins will stabilize at about 30% in the future for several reasons. First, the Company's new factory is now in a test phase with most construction completed. Second, recent inflation figures in China indicate that inflation has begun to moderate. Further, accompanying the sales volume increase of 22% in the 2012 third quarter was an increase in average selling price of 54%. Going forward, the Company is focused as well on increasing the percentage of higher margin products in its sales mix. A particular focus will be on increased direct sales to consumers at its growing franchise units in China as well as on increased Internet sales following the recent establishment of its Internet infrastructure in China. The Company also has seen steady quarter over quarter improvements in inventory turnover, as well as in accounts receivable collections which it expects will continue.

On Target For Growth Goals This Year

Ms. Tawny Lam, president of the Company, and a Co-founder of Diamond Sofa in the U.S., commented, "While never fully satisfied, we are pleased with our progress thus far this year, in particular the strong growth and excitement generated by our contemporary furniture brands in the U.S. and around the world. We design our furniture to fill the needs of modern urban consumers and obviously are succeeding. We remain very comfortable about achieving our growth goals for the year, which are full year sales growing to between $50 million and $58 million (mid-range: +25%) from $43.2 million in 2011, and net income increasing to between $7 million and $8 million (midrange: +39%) from $5.4 million last year."

Excitement Building for 2013

Mr. Jeffrey Wong, CEO, Chairman and Co-founder of the Company, added, "Looking ahead we already have in place a very strong foundation for continuing gains in 2013. In particular, this includes the planned start up by year end of production for IKEA in our new 161,460 square foot production line adjacent to our existing factory. As previously announced, we believe this will generate between $20 million and $25 million in new sales in 2013. In addition, we recently announced our first shipment of "Made in the USA" luxury natural latex mattresses to selected franchise stores in China. As 2013 progresses, we see this business growing increasingly rapidly, generating high margin sales that could equal or exceed our revenue forecast for sales to IKEA. Of course, we also will remain focused on other "Made in the USA" products we can sell in China where the possibilities really are unlimited and we have a jump on competition with our own growing distribution network in place. Further, any pickup in the world economy, especially in housing, should help us substantially, as home furnishings will be near or at the top of consumers' desired purchase lists."

About Nova LifeStyle, Inc.

Nova LifeStyle, Inc., a U.S. company headquartered in California, is a fast growing, innovative designer and manufacturer of modern LifeStyle furniture, primarily sofas, dining rooms, cabinets and bedrooms in matching collections. Nova's products are made in the U.S and Asia. Nova's collections of LifeStyle furniture brands include Diamond Sofa (www.diamondsofa.com), Colorful World, Giorgio Mobili and others. Nova's products feature urban contemporary styles with comfort and functionality and upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe and elsewhere in the world. To learn more about Nova LifeStyle, Inc., please visit www.novaLifeStyle.com.

Safe Harbor Statement

All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.

   
   
NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)  
   
    Nine Months Ended
September 30,
    Three Months Ended
September 30,
 
    2012     2011     2012     2011  
    (Unaudited)           (Unaudited)        
Net Sales                                
(Including sales to related party of $0 and $902,638 during the nine months ended September 30, 2012 and 2011; and $0 and $277,056 during the three months ended September 30, 2012 and 2011, respectively)   $ 46,351,192     $ 26,079,694     $ 19,204,877     $ 11,187,474  
                                 
Cost of Sales     35,690,294       18,645,205       15,369,908       7,994,772  
                                 
Gross Profit     10,660,898       7,434,489       3,834,969       3,192,702  
                                 
Operating Expenses                                
  Selling expenses     2,322,996       1,216,546       968,443       421,437  
  General and administrative expenses     3,457,455       2,187,875       1,096,354       770,877  
  Loss on disposal of plant, property and equipment     123,587       --       --       --  
                                 
Total Operating Expenses     5,904,038       3,404,421       2,064,797       1,192,314  
                                 
Income From Operations     4,756,860       4,030,068       1,770,172       2,000,388  
                                 
Other Income (Expenses)                                
  Non-operating income (expense)     (7,397 )     21,719       15,642       11,245  
  Foreign exchange transaction gain (loss)     39       (79,450 )     (23,936 )     (18,721 )
  Financial expense     (54,341 )     (49,821 )     (7,443 )     (33,499 )
                                 
Total Other Expenses, Net     (61,699 )     (107,552 )     (15,737 )     (40,975 )
                                 
Income Before Income Tax     4,695,161       3,922,516       1,754,435       1,959,413  
                                 
Income Tax Expense     1,047,646       655,859       510,542       277,824  
                                 
Net Income     3,647,515       3,266,657       1,243,893       1,681,589  
                                 
Other Comprehensive Income                                
Foreign currency translation     (78,267 )     423,204       (29,182 )     187,219  
                                 
Comprehensive Income   $ 3,569,248     $ 3,689,861     $ 1,214,711     $ 1,868,808  
                                 
Basic weighted average shares outstanding     18,460,955       13,451,350       18,518,089       16,431,723  
Diluted weighted average shares outstanding     18,652,892       13,522,150       18,709,596       16,641,815  
                                 
Basic net earnings per share   $ 0.20     $ 0.24     $ 0.07     $ 0.10  
Diluted net earnings per share   $ 0.20     $ 0.24     $ 0.07     $ 0.10  
                                 
                                 
                                 
NOVA LIFESTYLE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011
 
    September 30,   December 31,
    2012   2011
    (Unaudited)    
Assets            
             
Current Assets            
  Cash and cash equivalents   $ 1,712,185   $ 2,505,179
  Accounts receivable, net     24,452,857     18,974,612
  Accounts receivable - related party     --     28,289
  Due from factor     --     203,351
  Advance to suppliers     1,614,369     349,767
  Inventories     2,778,627     1,848,081
  Prepaid expenses and other receivable     202,350     113,853
  Deferred tax asset     156,208     156,974
             
Total Current Assets     30,916,596     24,180,106
             
Noncurrent Assets            
  Heritage and cultural assets     127,873     128,687
  Plant, property and equipment, net     8,594,748     8,721,186
  Construction in progress     2,319,560     91,466
  Construction deposit     796,241     634,830
  Lease deposit     27,652     -
  Goodwill     218,606     218,606
  Intangible assets, net     1,220,310     724,465
  Deferred tax asset, net     187,782     118,144
             
Total Noncurrent Assets     13,492,772     10,637,384
             
Total Assets   $ 44,409,368   $ 34,817,490
             
             
             
NOVA LIFESTYLE, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
SEPTEMBER 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011  
   
    September 30,     December 31,  
    2012     2011  
    (Unaudited)        
Liabilities and Stockholders' Equity                
                 
Current Liabilities                
  Accounts payable   $ 5,081,639     $ 6,758,058  
  Line of credit     4,535,745       --  
  Advance from customers     77,608       91,021  
  Accrued liabilities and other payables     925,930       834,128  
  Taxes payable     863,740       198,984  
                 
Total Current Liabilities     11,484,662       7,882,191  
                 
Noncurrent Liabilities                
  Deferred rent payable     54,122       58,949  
  Income tax payable     4,407,302       4,016,266  
                 
Total Noncurrent Liabilities     4,461,424       4,075,215  
                 
Total Liabilities     15,946,086       11,957,406  
                 
Contingencies and Commitments                
                 
Stockholders' Equity                
  Common stock, $0.001 par value; 75,000,000 shares authorized, 18,536,567 and 17,898,267 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively     18,537       17,898  
  Additional paid-in capital     19,107,845       17,074,535  
  Subscription receivable     (1,950,000 )     (1,950,000 )
  Statutory reserves     6,241       6,241  
  Accumulated other comprehensive income     2,060,707       2,138,974  
  Retained earnings     9,219,952       5,572,436  
                 
Total Stockholders' Equity     28,463,282       22,860,084  
                 
Total Liabilities and Stockholders' Equity   $ 44,409,368     $ 34,817,490  
                 

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